SECURITIES PURCHASE AGREEMENT
SECURITIES
PURCHASE AGREEMENT (this “Agreement”), dated as of
October 15, 2007, by and among Midnight Holdings Group, Inc., a Delaware
corporation, with headquarters located at 00000 Xxxx Xxxx, Xxxxx 000, Xxxxxxx
Xxxxxxxx, XX 00000 (the “Company”), and each of the
purchasers set forth on the signature pages hereto (the “Buyers”).
WHEREAS:
A. The
Company and the Buyers are executing and delivering this Agreement in reliance
upon the exemption from securities registration afforded by the rules and
regulations as promulgated by the United States Securities and Exchange
Commission (the “SEC”)
under the Securities Act of 1933, as amended (the “1933 Act”);
B. Buyers
desire to purchase and the Company desires to issue and sell, upon the terms
and
conditions set forth in this Agreement (i) 10% secured convertible notes of
the Company, in the form attached hereto as Exhibit “A”, in the aggregate
principal amount of Three Hundred Thousand Dollars ($300,000) (together with
any
note(s) issued in replacement thereof or otherwise with respect thereto in
accordance with the terms thereof, the “Notes”), convertible into
shares of common stock, par value $.00005 per share, of the Company (the “Common Stock”), upon the terms
and subject to the limitations and conditions set forth in such Notes and
(ii) warrants, in the form attached hereto as Exhibit “B”, to purchase an
aggregate of Six Hundred Thousand (600,000) shares of Common Stock (the “Warrants”);
C. Each
Buyer wishes to purchase, upon the terms and conditions stated in this
Agreement, such principal amount of Notes and number of Warrants as is set
forth
immediately below its name on the signature pages hereto; and
D. Contemporaneous
with the execution and delivery of this Agreement, the parties hereto are
executing and delivering a Registration Rights Agreement, in the form attached
hereto as Exhibit “C”
(the “Registration Rights
Agreement”), pursuant to which the Company has agreed to provide certain
registration rights under the 1933 Act and the rules and regulations promulgated
thereunder, and applicable state securities laws.
NOW
THEREFORE, the Company and
each of the Buyers severally (and not jointly) hereby agree as
follows:
1. PURCHASE
AND SALE OF NOTES
AND WARRANTS.
2. Purchase
of Notes and
Warrants. On the Closing Date (as defined below), the
Company shall issue and sell to each Buyer and each Buyer severally agrees
to
purchase from the Company such principal amount of Notes and number of Warrants
as is set forth immediately below such Buyer’s name on the signature pages
hereto.
3. Form
of
Payment. On the Closing Date (as defined below),
(i)each Buyer shall pay the purchase price for the Notes (less the purchase
price paid with respect to any Bridge Note) and the Warrants to be issued and
sold to it at the Closing (as defined below) (the “Purchase Price”) by wire
transfer of immediately available funds to the Company, in accordance with
the
Company’s written wiring instructions, against delivery of the Notes in the
principal amount equal to the Purchase Price and the number of Warrants as
is
set forth immediately below such Buyer’s name on the signature pages hereto, and
(ii) the Company shall deliver such Notes and Warrants duly executed on
behalf of the Company, to such Buyer, against delivery of such Purchase
Price.
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4. Closing
Date. Subject to the satisfaction (or written waiver)
of the conditions thereto set forth in Section 6 and Section 7 below, the date
and time of the issuance and sale of the Notes and the Warrants pursuant to
this
Agreement (the “Closing
Date”) shall be 12:00 noon, Eastern Standard Time on October 15, 2007, or
such other mutually agreed upon time. The closing of the transactions
contemplated by this Agreement (the “Closing”) shall occur on the
Closing Date at such location as may be agreed to by the parties.
5. BUYERS’
REPRESENTATIONS
AND
WARRANTIES. Each Buyer severally (and not jointly)
represents and warrants to the Company solely as to such Buyer
that:
6. and
the
shares of Common Stock issuable upon conversion of or otherwise pursuant to
the
Notes (including, without limitation, such additional shares of Common Stock,
if
any, as are issuable (i) on account of interest on the Notes, (ii) as
a result of the events described in Sections 1.3 and 1.4(g) of the Notes and
Section 2(c) of the Registration Rights Agreement or (iii) in payment of
the Standard Liquidated Damages Amount (as defined in Section 2(f) below)
pursuant to this Agreement, such shares of Common Stock being collectively
referred to herein as the “Conversion Shares”) and the
Warrants and the shares of Common Stock issuable upon exercise thereof (the
“Warrant Shares” and,
collectively with the Notes, Warrants and Conversion Shares, the “Securities”) for its own
account and not with a present view towards the public sale or distribution
thereof, except pursuant to sales registered or exempted from registration
under
the 1933 Act; provided, however,
that by
making the representations herein, such Buyer does not agree to hold any of
the
Securities for any minimum or other specific term and reserves the right to
dispose of the Securities at any time in accordance with or pursuant to a
registration statement or an exemption under the 1933 Act.
7. Accredited
Investor
Status. Such Buyer is an “accredited investor” as that
term is defined in Rule 501(a) of Regulation D (an “Accredited
Investor”).
8. Reliance
on
Exemptions. Such Buyer understands that the Securities
are being offered and sold to it in reliance upon specific exemptions from
the
registration requirements of United States federal and state securities laws
and
that the Company is relying upon the truth and accuracy of, and such Buyer’s
compliance with, the representations, warranties, agreements, acknowledgments
and understandings of such Buyer set forth herein in order to determine the
availability of such exemptions and the eligibility of such Buyer to acquire
the
Securities.
9. Information. Such
Buyer and its respective advisors, if any, have been furnished with all
materials relating to the business, finances and operations of the Company
and
materials relating to the offer and sale of the Securities which have been
reasonably requested by such Buyer or its advisors. Such Buyer and
its respective advisors, if any, have been afforded the opportunity to ask
questions of the Company. Notwithstanding the foregoing, the Company
has not disclosed to such Buyer any material nonpublic information and will
not
disclose such information unless such information is disclosed to the public
prior to or promptly following such disclosure to such Buyer. Neither
such inquiries nor any other due diligence investigation conducted by such
Buyer
or any of its respective advisors or representatives shall modify, amend or
affect Buyer’s right to rely on the Company’s representations and warranties
contained in Section 3 below. Such Buyer understands that its
investment in the Securities involves a significant degree of risk.
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10. Governmental
Review. Such Buyer understands that no United States
federal or state agency or any other government or governmental agency has
passed upon or made any recommendation or endorsement of the
Securities.
11. Transfer
or
Re-sale. Such Buyer understands that (i) except as
provided in the Registration Rights Agreement, the sale or re-sale of the
Securities have not been and are not being registered under the 1933 Act or
any
applicable state securities laws, and the Securities may not be transferred
unless (a) the Securities are sold pursuant to an effective registration
statement under the 1933 Act, (b) such Buyer shall have delivered to the
Company an opinion of counsel that shall be in form, substance and scope
customary for opinions of counsel in comparable transactions to the effect
that
the Securities to be sold or transferred may be sold or transferred pursuant
to
an exemption from such registration, which opinion shall be accepted by the
Company, (c) the Securities are sold or transferred to an “affiliate” (as
defined in Rule 144 promulgated under the 1933 Act (or a successor rule) (“Rule 144”)) of such Buyer who
agrees to sell or otherwise transfer the Securities only in accordance with
this
Section 2(f) and who is an Accredited Investor, or (d) the Securities are
sold pursuant to Rule 144, and such Buyer shall have delivered to the Company
an
opinion of counsel that shall be in form, substance and scope customary for
opinions of counsel in corporate transactions, which opinion shall be accepted
by the Company; (ii) any sale of such Securities made in reliance on Rule 144
may be made only in accordance with the terms of said Rule and further, if
said
Rule is not applicable, any re-sale of such Securities under circumstances
in
which the seller (or the person through whom the sale is made) may be deemed
to
be an underwriter (as that term is defined in the 0000 Xxx) may require
compliance with some other exemption under the 1933 Act or the rules and
regulations of the SEC thereunder; and (iii) neither the Company nor any other
person is under any obligation to register such Securities under the 1933 Act
or
any state securities laws or to comply with the terms and conditions of any
exemption thereunder (in each case, other than pursuant to the Registration
Rights Agreement). Notwithstanding the foregoing or anything else
contained herein to the contrary, subject to applicable law, the Securities
may
be pledged as collateral in connection with a bonafide
margin account
or other lending arrangement. In the event that the Company does not
accept an opinion of counsel provided by such Buyer with respect to the transfer
of Securities pursuant to an exemption from registration, such as Rule 144,
and
such opinion is correct in form and substance, within three (3) business days
of
delivery of the opinion to the Company, the Company shall pay to such Buyer
liquidated damages of three percent (3%) of the outstanding amount of the Notes
held by such Buyer per month plus accrued and unpaid interest on the Notes,
prorated for partial months, in cash or shares at the option of the Company
(“Standard Liquidated Damages
Amount”). If the Company elects to pay the Standard Liquidated
Damages Amount in shares of Common Stock, such shares shall be issued at the
Conversion Price at the time of payment.
12. Legends. Such
Buyer understands that the Notes and the Warrants and, until such time as the
Conversion Shares and Warrant Shares have been registered under the 1933 Act
as
contemplated by the Registration Rights Agreement or otherwise may be sold
pursuant to Rule 144 without any restriction as to the number of securities
as
of a particular date that can then be immediately sold, the Conversion Shares
and Warrant Shares may bear a restrictive legend in substantially the following
form (and a stop-transfer order may be placed against transfer of the
certificates for such Securities):
“The
securities represented by this certificate have not been registered under the
Securities Act of 1933, as amended. The securities may not be sold,
transferred, assigned, or otherwise disposed of in the absence of an effective
registration statement for the securities under said Act, or an opinion of
counsel, in form, substance and scope customary for opinions of counsel in
comparable transactions, that registration is not required under said Act or
unless sold pursuant to Rule 144 under said Act.”
The
legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of any Security upon which it
is
stamped, if, unless otherwise required by applicable state securities laws,
(a)
such Security is registered for sale under an effective registration statement
filed under the 1933 Act or otherwise may be sold pursuant to Rule 144 without
any restriction as to the number of securities as of a particular date that
can
then be immediately sold, (b) such holder provides the Company with an opinion
of counsel, in form, substance and scope customary for opinions of counsel
in
comparable transactions, to the effect that a public sale or transfer of such
Security may be made without registration under the 1933 Act, which opinion
shall be accepted by the Company so that the sale or transfer is effected,
or
(c) such holder provides the Company with reasonable assurances that such
Security shall be sold pursuant to Rule 144. Such Buyer agrees to
sell all Securities, including those represented by a certificate(s) from which
the legend has been removed, in compliance with applicable prospectus delivery
requirements, if any.
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13. Authorization;
Enforcement. This Agreement and the Registration Rights Agreement
have been duly and validly authorized. This Agreement has been duly
executed and delivered on behalf of such Buyer, and this Agreement constitutes,
and upon execution and delivery by such Buyer of the Registration Rights
Agreement, such agreement will constitute, legal, valid and binding agreements
of such Buyer enforceable in accordance with their respective
terms.
14. Residency. Such
Buyer is a resident of the jurisdiction set forth immediately below such Buyer’s
name on the signature pages hereto.
15. REPRESENTATIONS
AND
WARRANTIES OF THE COMPANY. The Company represents and
warrants to each Buyer that:
16. Organization
and
Qualification. The Company and each of its Subsidiaries
(as defined below), if any, is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction in which it is
incorporated, with full power and authority (corporate and other) to own, lease,
use and operate its properties and to carry on its business as and where now
owned, leased, used, operated and conducted. Schedule 3(a) sets forth a
list of all of the Subsidiaries (as defined below) of the Company and the
jurisdiction in which each is incorporated. The Company and each of
its Subsidiaries is duly qualified as a foreign corporation to do business
and
is in good standing in every jurisdiction in which its ownership or use of
property or the nature of the business conducted by it makes such qualification
necessary except where the failure to be so qualified or in good standing would
not have a Material Adverse Effect. “Material Adverse Effect” means
any material adverse effect on the business, operations, assets, financial
condition or prospects of the Company or its Subsidiaries, if any, taken as
a
whole, or on the transactions contemplated hereby or by the agreements or
instruments to be entered into in connection herewith. “Subsidiaries” means any
corporation or other organization, whether incorporated or unincorporated,
in
which the Company owns, directly or indirectly, all of the equity or other
ownership interests.
17. Authorization;
Enforcement. (i) The Company has all requisite
corporate power and authority to enter into and perform this Agreement, the
Registration Rights Agreement, the Notes and the Warrants and, subject to the
adoption of necessary resolutions by the Board of Directors and the stockholders
of the Company to consummate the transactions contemplated hereby and thereby
and to issue the Securities, in accordance with the terms hereof and thereof,
(ii) the execution and delivery of this Agreement, the Registration Rights
Agreement, the Notes and the Warrants by the Company and, the consummation
by it
of the transactions contemplated hereby and thereby (including, without
limitation, the issuance of the Notes and the Warrants and the issuance and
reservation for issuance of the Conversion Shares and Warrant Shares issuable
upon conversion or exercise thereof) have been duly authorized by the Company’s
Board of Directors and no further consent or authorization of the Company,
its
Board of Directors, or its shareholders is required, (iii) this Agreement has
been duly executed and delivered by the Company by its authorized
representative, and such authorized representative is the true and official
representative with authority to sign this Agreement and the other documents
executed in connection herewith and bind the Company accordingly, and (iv)
this
Agreement constitutes, and upon execution and delivery by the Company of the
Registration Rights Agreement, the Notes and the Warrants, each of such
instruments will constitute, a legal, valid and binding obligation of the
Company enforceable against the Company in accordance with its respective
terms.
18. Capitalization. Except
as set forth on Schedule
3(c), as of June 30, 2006 hereof, the authorized capital stock of the
Company consists of (i) 1,000,000,000 shares of Common Stock, par value
$0.00005, of which 470,050,001 shares are issued and outstanding and (ii)
10,000,000 shares of preferred stock, par value $0.001, of which no shares
are
issued and outstanding. All of such outstanding shares of capital stock
are, or upon issuance will be, duly authorized, validly issued, fully paid
and
nonassessable. No shares of capital stock of the Company are subject to
preemptive rights or any other similar rights of the shareholders of the Company
or any liens or encumbrances imposed through the actions or failure to act
of
the Company. Except as disclosed in Schedule 3(c), as of the date
of this Agreement, (i) there are no outstanding options, warrants, scrip, rights
to subscribe for, puts, calls, rights of first refusal, agreements,
understandings, claims or other commitments or rights of any character
whatsoever relating to, or securities or rights convertible into or exchangeable
for any shares of capital stock of the Company or any of its Subsidiaries,
or
arrangements by which the Company or any of its Subsidiaries is or may become
bound to issue additional shares of capital stock of the Company or any of
its
Subsidiaries, (ii) there are no agreements or arrangements under which the
Company or any of its Subsidiaries is obligated to register the sale of any
of
its or their securities under the 1933 Act (except the Registration Rights
Agreement) and (iii) there are no anti-dilution or price adjustment provisions
contained in any security issued by the Company (or in any agreement providing
rights to security holders) that will be triggered by the issuance of the Notes,
the Warrants, the Conversion Shares or Warrant Shares. The Company has
made available to each Buyer true copies of the Certificate of Incorporation
as
in effect on the date hereof, the Company’s By-laws, as in effect on the date
hereof (the “By-laws”),
and the terms of all securities convertible into or exercisable for Common
Stock
of the Company and the material rights of the holders thereof in respect
thereto.
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19. Issuance
of
Shares. The Conversion Shares and Warrant Shares are
duly authorized and reserved for issuance and, upon conversion of the Notes
and
exercise of the Warrants in accordance with their respective terms, will be
validly issued, fully paid and non-assessable, and free from all taxes, liens,
claims and encumbrances with respect to the issue thereof and shall not be
subject to preemptive rights or other similar rights of shareholders of the
Company and will not impose personal liability upon the holder
thereof.
20. Acknowledgment
of
Dilution. The Company understands and acknowledges the
potentially dilutive effect to the Common Stock upon the issuance of the
Conversion Shares and Warrant Shares upon conversion of the Note or exercise
of
the Warrants. The Company further acknowledges that its obligation to
issue Conversion Shares and Warrant Shares upon conversion of the Notes or
exercise of the Warrants in accordance with this Agreement, the Notes and the
Warrants is absolute and unconditional regardless of the dilutive effect that
such issuance may have on the ownership interests of other shareholders of
the
Company.
21. No
Conflicts. The execution, delivery and performance of
this Agreement, the Registration Rights Agreement, the Notes and the Warrants
by
the Company and the consummation by the Company of the transactions contemplated
hereby and thereby (including, without limitation, the issuance and reservation
for issuance of the Conversion Shares and Warrant Shares) will not (i) conflict
with or result in a violation of any provision of the Certificate of
Incorporation or By-laws or (ii) violate or conflict with, or result in a breach
of any provision of, or constitute a default (or an event which with notice
or
lapse of time or both could become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture, patent, patent license or instrument to which the Company
or any of its Subsidiaries is a party, or (iii) result in a violation
of any law, rule, regulation, order, judgment or decree (including federal
and
state securities laws and regulations and regulations of any self-regulatory
organizations to which the Company or its securities are currently subject)
applicable to the Company or any of its Subsidiaries or by which any property
or
asset of the Company or any of its Subsidiaries is bound or affected (except
for
such conflicts, defaults, terminations, amendments, accelerations, cancellations
and violations as would not, individually or in the aggregate, have a Material
Adverse Effect). Neither the Company nor any of its Subsidiaries is
in violation of its Certificate of Incorporation, By-laws or other
organizational documents and neither the Company nor any of its Subsidiaries
is
in default (and no event has occurred which with notice or lapse of time or
both
could put the Company or any of its Subsidiaries in default) under, and neither
the Company nor any of its Subsidiaries has taken any action or failed to take
any action that would give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to
which
the Company or any of its Subsidiaries is a party or by which any property
or
assets of the Company or any of its Subsidiaries is bound or affected, except
for possible defaults as would not, individually or in the aggregate, have
a
Material Adverse Effect. The businesses of the Company and its Subsidiaries,
if
any, are not being conducted, and shall not be conducted so long as a Buyer
owns
any of the Securities, in violation of any law, ordinance or regulation of
any
governmental entity, which violation would cause a Material Adverse
Effect. Except as specifically contemplated by this Agreement and as
required under the 1933 Act and any applicable state securities laws, the
Company is not required to obtain any consent, authorization or order of, or
make any filing or registration with, any court, governmental agency, regulatory
agency, self regulatory organization or stock market or any third party in
order
for it to execute, deliver or perform any of its obligations under this
Agreement, the Registration Rights Agreement, the Notes or the Warrants in
accordance with the terms hereof or thereof or to issue and sell the Notes
and
Warrants in accordance with the terms hereof and to issue the Conversion Shares
upon conversion of the Notes and the Warrant Shares upon exercise of the
Warrants. All consents, authorizations, orders, filings and
registrations which the Company is required to obtain pursuant to the preceding
sentence have been obtained or will be obtained promptly after Closing effected
on or prior to the date hereof.
22. Absence
of Certain
Changes. Since December 31, 2005, there has been no
material adverse change and no material adverse development in the assets,
liabilities, business, properties, operations, financial condition, results
of
operations or prospects of the Company or any of its Subsidiaries.
23. Absence
of
Litigation. There is no action, suit, claim,
proceeding, inquiry or investigation before or by any court, public board,
government agency, self-regulatory organization or body pending or, to the
knowledge of the Company or any of its Subsidiaries, threatened against or
affecting the Company or any of its Subsidiaries, or their officers or directors
in their capacity as such, that could have a Material Adverse
Effect. Schedule
3(h) contains a complete list and summary description of any pending or
threatened proceeding against or affecting the Company or any of its
Subsidiaries, without regard to whether it would have a Material Adverse
Effect. The Company and its Subsidiaries are unaware of any facts or
circumstances which might give rise to any of the foregoing.
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24. Patents,
Copyrights,
etc. The Company and each of its Subsidiaries owns or
possesses the requisite licenses or rights to use all patents, patent
applications, patent rights, inventions, know-how, trade secrets, trademarks,
trademark applications, service marks, service names, trade names and copyrights
(“Intellectual
Property”) necessary to enable it to conduct its business as now operated
(and, to the best of the Company’s knowledge, as presently contemplated to be
operated in the future); there is no claim or action by any person pertaining
to, or proceeding pending, or to the Company’s knowledge threatened, which
challenges the right of the Company or of a Subsidiary with respect to any
Intellectual Property necessary to enable it to conduct its business as now
operated (and, to the best of the Company’s knowledge, as presently contemplated
to be operated in the future); to the best of the Company’s knowledge, the
Company’s or its Subsidiaries’ current and intended products, services and
processes do not infringe on any Intellectual Property or other rights held
by
any person; and the Company is unaware of any facts or circumstances which
might
give rise to any of the foregoing. The Company and each of its
Subsidiaries have taken reasonable security measures to protect the secrecy,
confidentiality and value of their Intellectual Property.
25. No
Materially Adverse
Contracts, Etc. Neither the Company nor any of its
Subsidiaries is subject to any charter, corporate or other legal restriction,
or
any judgment, decree, order, rule or regulation which in the judgment of the
Company’s officers has or is expected in the future to have a Material Adverse
Effect. Neither the Company nor any of its Subsidiaries is a party to
any contract or agreement which in the judgment of the Company’s officers has or
is expected to have a Material Adverse Effect.
26. Tax
Status. Except as set forth on Schedule 3(k), the
Company and
each of its Subsidiaries has made or filed all federal, state and foreign income
and all other tax returns, reports and declarations required by any jurisdiction
to which it is subject (unless and only to the extent that the Company and
each
of its Subsidiaries has set aside on its books provisions reasonably adequate
for the payment of all unpaid and unreported taxes) and has paid all taxes
and
other governmental assessments and charges that are material in amount, shown
or
determined to be due on such returns, reports and declarations, except those
being contested in good faith and has set aside on its books provisions
reasonably adequate for the payment of all taxes for periods subsequent to
the
periods to which such returns, reports or declarations apply. To the
Company’s knowledge, there are no unpaid taxes in any material amount claimed to
be due by the taxing authority of any jurisdiction. The Company has
not executed a waiver with respect to the statute of limitations relating to
the
assessment or collection of any foreign, federal, state or local
tax. Except as set forth on Schedule 3(k), none of the
Company’s tax returns is presently being audited by any taxing
authority.
27. Certain
Transactions. Except as set forth on Schedule 3(l) and
except for
arm’s length transactions pursuant to which the Company or any of its
Subsidiaries makes payments in the ordinary course of business upon terms no
less favorable than the Company or any of its Subsidiaries could obtain from
third parties and other than the grant of stock options disclosed on Schedule 3(c), none of the
officers, directors, or employees of the Company is presently a party to any
transaction with the Company or any of its Subsidiaries (other than for services
as employees, officers and directors), including any contract, agreement or
other arrangement providing for the furnishing of services to or by, providing
for rental of real or personal property to or from, or otherwise requiring
payments to or from any officer, director or such employee or, to the knowledge
of the Company, any corporation, partnership, trust or other entity in which
any
officer, director, or any such employee has a substantial interest or is an
officer, director, trustee or partner.
28. Disclosure. All
information relating to or concerning the Company or any of its Subsidiaries
set
forth in this Agreement and provided to the Buyers pursuant to Section 2(d)
hereof and otherwise in connection with the transactions contemplated hereby
is,
to the knowledge of the Company, true and correct in all material respects
and
the Company has not omitted to state any material fact necessary in order to
make the statements made herein or therein, in light of the circumstances under
which they were made, not misleading. To the knowledge of the
Company, no event or circumstance has occurred or exists with respect to the
Company or any of its Subsidiaries or its or their business, properties,
prospects, operations or financial conditions, which, under applicable law,
rule
or regulation, requires public disclosure or announcement by the Company but
which has not been so publicly announced or disclosed (assuming for this purpose
that the Company’s reports filed under the 1934 Act are being incorporated into
an effective registration statement filed by the Company under the 1933
Act).
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29. Acknowledgment
Regarding
Buyers’ Purchase of Securities. The Company
acknowledges and agrees that the Buyers are acting solely in the capacity of
arm’s length purchasers with respect to this Agreement and the transactions
contemplated hereby. The Company further acknowledges that no Buyer
is acting as a financial advisor or fiduciary of the Company (or in any similar
capacity) with respect to this Agreement and the transactions contemplated
hereby and any statement made by any Buyer or any of their respective
representatives or agents in connection with this Agreement and the transactions
contemplated hereby is not advice or a recommendation and is merely incidental
to the Buyers’ purchase of the Securities. The Company further
represents to each Buyer that the Company’s decision to enter into this
Agreement has been based solely on the independent evaluation of the Company
and
its representatives.
30. No
Integrated
Offering. Except for sales of securities to the Buyers
and affiliates thereof heretofore consummated, neither the Company, nor any
of
its affiliates, nor any person acting on its or their behalf, has directly
or
indirectly made any offers or sales in any security or solicited any offers
to
buy any security under circumstances that would require registration under
the
1933 Act of the issuance of the Securities to the Buyers. The
issuance of the Securities to the Buyers will not be integrated with any other
issuance of the Company’s securities (past, current or future) for purposes of
any shareholder approval provisions applicable to the Company or its
securities.
31. No
Brokers. The Company has taken no action which would
give rise to any claim by any person for brokerage commissions, transaction
fees
or similar payments relating to this Agreement or the transactions contemplated
hereby.
32. Permits;
Compliance. The Company and each of its Subsidiaries is
in possession of all material franchises, grants, authorizations, licenses,
permits, easements, variances, exemptions, consents, certificates, approvals
and
orders necessary to own, lease and operate its properties and to carry on its
business as it is now being conducted (collectively, the “Company Permits”), and there
is no action pending or, to the knowledge of the Company, threatened regarding
suspension or cancellation of any of the Company Permits. Neither the
Company nor any of its Subsidiaries is in conflict with, or in default or
violation of, any of the Company Permits, except for any such conflicts,
defaults or violations which, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect. Since
December 31, 2005, neither the Company nor any of its Subsidiaries has received
any notification with respect to possible conflicts, defaults or violations
of
applicable laws, except for notices relating to possible conflicts, defaults
or
violations, which conflicts, defaults or violations would not have a Material
Adverse Effect.
a. Environmental
Matters.
(i) There
are, to the Company’s knowledge, with respect to the Company or any of its
Subsidiaries or any predecessor of the Company, no present violations of
Environmental Laws (as defined below), releases of any material into the
environment, actions, activities, circumstances, conditions, events, incidents,
or contractual obligations which may give rise to any common law environmental
liability or any liability under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 or similar federal, state, local or
foreign laws and neither the Company nor any of its Subsidiaries has received
any notice with respect to any of the foregoing, nor is any action pending
or,
to the Company’s knowledge, threatened in connection with any of the
foregoing. The term “Environmental Laws” means all
material federal, state, local or foreign laws relating to pollution or
protection of human health or the environment (including, without limitation,
ambient air, surface water, groundwater, land surface or subsurface strata),
including, without limitation, laws relating to emissions, discharges, releases
or threatened releases of chemicals, pollutants contaminants, or toxic or
hazardous substances or wastes (collectively, “Hazardous Materials”) into the
environment, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Hazardous Materials,
as well as all authorizations, codes, decrees, demands or demand letters,
injunctions, judgments, licenses, notices or notice letters, orders, permits,
plans or regulations issued, entered, promulgated or approved
thereunder.
Page
7
(ii) Other
than those that are or were stored, used or disposed of in compliance with
applicable law, no Hazardous Materials are contained on or about any real
property currently owned, leased or used by the Company or any of its
Subsidiaries, and no Hazardous Materials were released on or about any real
property previously owned, leased or used by the Company or any of its
Subsidiaries during the period the property was owned, leased or used by the
Company or any of its Subsidiaries, except in the normal course of the Company’s
or any of its Subsidiaries’ business.
(iii) There
are
no underground storage tanks on or under any real property owned, leased or
used
by the Company or any of its Subsidiaries that are not in compliance with
applicable law.
33. Title
to
Property. Except as set forth on Schedule 3(s), the
Company and
its Subsidiaries have good and marketable title to all real property and good
and marketable title to all personal property owned by them which is material
to
the business of the Company and its Subsidiaries, in each case free and clear
of
all liens and encumbrances and, to the knowledge of the Company, defects or
such
as would not have a Material Adverse Effect. To the knowledge of the
Company, any real property and facilities held under lease by the Company and
its Subsidiaries are held by them under valid, subsisting and enforceable leases
with such exceptions as would not have a Material Adverse Effect.
34. Insurance. The
Company and each of its Subsidiaries are insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts
as
management of the Company believes to be prudent and customary in the businesses
in which the Company and its Subsidiaries are engaged. Neither the
Company nor any such Subsidiary has any reason to believe that it will not
be
able to renew its existing insurance coverage as and when such coverage expires
or to obtain similar coverage from similar insurers as may be necessary to
continue its business at a cost that would not have a Material Adverse
Effect. The Company has provided to Buyer true and correct copies of
all policies relating to directors’ and officers’ liability coverage, errors and
omissions coverage, and commercial general liability coverage.
35. Internal
Accounting
Controls. The Company and each of its Subsidiaries
maintain a system of internal accounting controls sufficient, in the judgment
of
the Company’s board of directors, to provide reasonable assurance that (i)
transactions are executed in accordance with management’s general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management’s general or specific
authorization and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken
with
respect to any differences.
36. Foreign
Corrupt
Practices. Neither the Company, nor any of its
Subsidiaries, nor any director, officer, agent, employee or other person acting
on behalf of the Company or any Subsidiary has, in the course of his actions
for, or on behalf of, the Company, used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expenses relating to
political activity; made any direct or indirect unlawful payment to any foreign
or domestic government official or employee from corporate funds; violated
or is
in violation of any provision of the U.S. Foreign Corrupt Practices Act of
1977,
as amended, or made any bribe, rebate, payoff, influence payment, kickback
or
other unlawful payment to any foreign or domestic government official or
employee.
37. Solvency. The
Company (after giving effect to the transactions contemplated by this Agreement)
is solvent i.e., its assets have a fair market value in excess of the amount
required to pay its probable liabilities on its existing debts as they become
absolute and matured) and currently the Company has no information that would
lead it to reasonably conclude that the Company would not, after giving effect
to the transaction contemplated by this Agreement, have the ability to, nor
does
it intend to take any action that would impair its ability to, pay its debts
from time to time incurred in connection therewith as such debts
mature.
38. No
Investment
Company. The Company is not, and upon the issuance and
sale of the Securities as contemplated by this Agreement will not be an
“investment company” required to be registered under the Investment Company Act
of 1940 (an “Investment
Company”). The Company is not controlled by an Investment
Company.
39. Breach
of Representations
and Warranties by the Company. If the Company breaches
any of the representations or warranties set forth in this Section 3, and in
addition to any other remedies available to the Buyers pursuant to this
Agreement, the Company shall pay to the Buyers the Standard Liquidated Damages
Amount in cash or in shares of Common Stock at the option of the Company, until
such breach is cured. If the Company elects to pay the Standard
Liquidated Damages Amounts in shares of Common Stock, such shares shall be
issued at the Conversion Price at the time of payment.
Page
8
40. COVENANTS.
41. Best
Efforts. The parties shall use their best efforts to
satisfy timely each of the conditions agreed to thereby described in Section
6
and 7 of this Agreement.
42. Form
D; Blue Sky
Laws. The Company agrees to file a Form D with respect
to the Securities as required under Regulation D and to make available a copy
thereof to each Buyer promptly after such filing. The Company shall,
on, before or promptly after the Closing Date, take such action as the Company
shall reasonably determine is necessary to qualify the Securities for sale
to
the Buyers under applicable securities or “blue sky” laws of the states of the
United States (or to obtain an exemption from such qualification), and shall
make available evidence of any such action so taken to each Buyer on or prior
to
the Closing Date.
43. Reporting
Status;
Eligibility to Use Form S-3, SB-2 or Form
S-1. The
Company represents
and warrants that it shall use its best efforts to meet the requirements for
the
use of Form S-3 (or if the Company is not eligible for the use of Form S-3
as of
the Filing Date (as defined in the Registration Rights Agreement), the Company
may use the form of registration for which it is eligible at that
time) for registration of the sale by the Buyer of the Registrable Securities
(as defined in the Registration Rights Agreement). So long as any
Buyer beneficially owns any of the Securities, the Company shall use its best
efforts to timely file all reports required to be filed with the SEC pursuant
to
the 1934 Act, and the Company shall not terminate its status as an issuer
required to file reports under the 1934 Act even if the 1934 Act or the rules
and regulations thereunder would permit such termination. The Company
further agrees that it shall use its best efforts to file all reports required
to be filed by the Company with the SEC in a timely manner so as to become
eligible, and thereafter to maintain its eligibility, for the use of Form
S-3. The Company shall issue a press release describing the materials
terms of the transaction contemplated hereby as soon as practicable following
the Closing Date but in no event more than five (5) business days of the Closing
Date, which press release shall be subject to prior review by the
Buyers. The Company agrees that such press release shall not disclose
the name of the Buyers unless expressly consented to in writing by the Buyers
or
unless required by applicable law or regulation, and then only to the extent
of
such requirement.
44. Use
of
Proceeds. The Company shall use the proceeds from the
sale of the Notes and the Warrants for general working capital purposes and
shall not, directly or indirectly, use such proceeds for any loan to or
investment in any other corporation, partnership, enterprise or other person
(except in connection with its currently existing direct or indirect
Subsidiaries.
45. Future
Offerings. Subject to the exceptions described below,
the Company will not, without the prior written consent of a
majority-in-interest of the Buyers, not to be unreasonably withheld, negotiate
or contract with any party to obtain additional equity financing (including
debt
financing with an equity component) that involves (A) the issuance of Common
Stock at a discount to the market price of the Common Stock on the date of
issuance (taking into account the value of any warrants or options to acquire
Common Stock issued in connection therewith) or (B) the issuance of convertible
securities that are convertible into an indeterminate number of shares of Common
Stock or (C) the issuance of warrants during the period (the “Lock-up Period”) beginning on
the Closing Date and ending on the later of (i) two hundred seventy (270) days
from the Closing Date and (ii) one hundred eighty (180) days from the date
the
Registration Statement (as defined in the Registration Rights Agreement) is
declared effective (plus any days in which sales cannot be made
thereunder). In addition, subject to the exceptions described below,
the Company will not conduct any equity financing (including debt with an equity
component) (“Future
Offerings”) during the period beginning on the Closing Date and ending
two (2) years after the end of the Lock-up Period unless it shall have first
delivered to each Buyer, at least twenty (20) business days prior to the closing
of such Future Offering, written notice describing the proposed Future Offering,
including the terms and conditions thereof and proposed definitive documentation
to be entered into in connection therewith, and providing each Buyer an option
during the fifteen (15) day period following delivery of such notice to purchase
its pro rata share (based on the ratio that the aggregate principal amount
of
Notes purchased by it hereunder bears to the aggregate principal amount of
Notes
purchased hereunder) of the securities being offered in the Future Offering on
the same terms as contemplated by such Future Offering (the limitations referred
to in this sentence and the preceding sentence are collectively referred to
as
the “Capital Raising
Limitations”). In the event
the terms
and conditions of a proposed Future Offering are amended in any respect after
delivery of the notice to the Buyers concerning the proposed Future Offering,
the Company shall deliver a new notice to each Buyer describing the amended
terms and conditions of the proposed Future Offering and each Buyer thereafter
shall have an option during the fifteen (15) day period following delivery
of
such new notice to purchase its pro rata share of the securities being offered
on the same terms as contemplated by such proposed Future Offering, as
amended. The foregoing sentence shall apply to successive amendments
to the terms and conditions of any proposed Future Offering. The
Capital Raising Limitations shall not apply to any transaction involving (i)
issuances of securities in a firm commitment underwritten public offering
(excluding a continuous offering pursuant to Rule 415 under the 0000 Xxx) or
(ii) issuances of securities as consideration for a merger, consolidation or
purchase of assets, or in connection with any strategic partnership or joint
venture (the primary purpose of which is not to raise equity capital), or in
connection with the disposition or acquisition of a business, product or license
by the Company. The Capital Raising Limitations also shall not apply
to the issuance of securities upon exercise or conversion of the Company’s
options, warrants or other convertible securities outstanding as of the date
hereof or to the grant of additional options or warrants, or the issuance of
additional securities, under any Company stock option or restricted stock plan
approved by the shareholders of the Company.
Page
9
46. Expenses. At
the Closing, the Company shall reimburse Buyers for expenses incurred by them
in
connection with the negotiation, preparation, execution, delivery and
performance of this Agreement and the other agreements to be executed in
connection herewith (“Documents”), including,
without limitation, attorneys’ and consultants’ fees and expenses, transfer
agent fees, fees for stock quotation services, fees relating to any amendments
or modifications of the Documents or any consents or waivers of provisions
in
the Documents, fees for the preparation of opinions of counsel, escrow fees,
and
costs of restructuring the transactions contemplated by the Documents in an
amount not to exceed $30,000. When possible, the Company must pay
these fees directly, otherwise the Company must make immediate payment for
reimbursement to the Buyers for all fees and expenses immediately upon written
notice by the Buyer or the submission of an invoice by the Buyer. If
the Company fails to reimburse the Buyer in full within three (3) business
days
of the written notice or submission of invoice by the Buyer, the Company shall
pay interest on the total amount of fees to be reimbursed at a rate of 15%
per
annum.
47. Financial
Information. The Company agrees to send the following
reports to each Buyer until such Buyer transfers, assigns, or sells all of
the
Securities: (i) within ten (10) days after the filing with the SEC, a copy
of its Annual Report on Form 10-KSB its Quarterly Reports on Form 10-QSB and
any
Current Reports on Form 8-K; (ii) within one (1) day after release, copies
of all press releases issued by the Company or any of its Subsidiaries; and
(iii) contemporaneously with the making available or giving to the
shareholders of the Company, copies of any notices or other information the
Company makes available or gives to such shareholders.
48. Authorization
and
Reservation of Shares. The Company shall at all times
have authorized, and reserved for the purpose of issuance, a sufficient number
of shares of Common Stock to provide for the full conversion or exercise of
the
outstanding Notes and Warrants and issuance of the Conversion Shares and Warrant
Shares in connection therewith (based on the Conversion Price of the Notes
or
Exercise Price of the Warrants in effect from time to time) and as otherwise
required by the Notes. The Company shall not reduce the number of
shares of Common Stock reserved for issuance upon conversion of Notes and
exercise of the Warrants without the consent of each Buyer. The
Company shall at all times maintain the number of shares of Common Stock so
reserved for issuance at an amount (“Reserved Amount”) equal to no
less than two (2) times the number that is then actually issuable upon full
conversion of the Notes and upon exercise of the Warrants (based on the
Conversion Price of the Notes or the Exercise Price of the Warrants in effect
from time to time). If at any time the number of shares of Common
Stock authorized and reserved for issuance (“Authorized and Reserved
Shares”) is below the Reserved Amount, the Company will promptly take all
corporate action necessary to authorize and reserve a sufficient number of
shares, including, without limitation, calling a special meeting of shareholders
to authorize additional shares to meet the Company’s obligations under this
Section 4(h), in the case of an insufficient number of authorized shares, obtain
shareholder approval of an increase in such authorized number of shares, and
voting the management shares of the Company in favor of an increase in the
authorized shares of the Company to ensure that the number of authorized shares
is sufficient to meet the Reserved Amount. If the Company fails to
obtain such shareholder approval within sixty (60) days following the date
on
which the number of Reserved Amount exceeds the Authorized and Reserved Shares,
the Company shall pay to the Buyers the Standard Liquidated Damages Amount,
in
cash or in shares of Common Stock at the option of each Buyer. If a
Buyer elects to be paid the Standard Liquidated Damages Amount in shares of
Common Stock, such shares shall be issued at the Conversion Price at the time
of
payment. In order to ensure that the Company has authorized a
sufficient amount of shares to meet the Reserved Amount at all times, the
Company shall use its best efforts to deliver to a representative for the Buyers
at the end of every month a list detailing (1) the current amount of shares
authorized by the Company and reserved for the Buyers; and (2) amount of shares
issuable upon conversion of the Notes and upon exercise of the Warrants and
as
payment of interest accrued on the Notes for one year. If the Company
fails to provide such list within five (5) business days of having received
a
written demand therefor, the Company shall pay the Standard Liquidated Damages
Amount, in cash or in shares of Common Stock at the option of the Buyer, until
the list is delivered. If the Buyer elects to be paid the Standard
Liquidated Damages Amount in shares of Common Stock, such shares shall be issued
at the Conversion Price at the time of payment.
Page
10
49. Listing. The
Company shall use its best efforts to secure the listing of the Conversion
Shares and Warrant Shares upon each national securities exchange or automated
quotation system, if any, upon which shares of Common Stock are then listed
(subject to official notice of issuance) and, so long as any Buyer owns any
of
the Securities, shall maintain, so long as any other shares of Common Stock
shall be so listed, such listing of all Conversion Shares and Warrant Shares
from time to time issuable upon conversion of the Notes or exercise of the
Warrants. The Company will use best efforts to obtain and, so long as
any Buyer owns any of the Securities, maintain the listing and trading of its
Common Stock on the OTCBB or any equivalent replacement exchange, the Nasdaq
National Market (“Nasdaq”), the Nasdaq SmallCap
Market (“Nasdaq
SmallCap”), the New York Stock Exchange (“NYSE”), or the American
Stock
Exchange (“AMEX”) and
will comply in all respects with the Company’s reporting, filing and other
obligations under the bylaws or rules of the National Association of Securities
Dealers (“NASD”) and
such exchanges, as applicable. The Company shall promptly provide to
each Buyer copies of any notices it receives from the OTCBB and any other
exchanges or quotation systems on which the Common Stock is then listed
regarding the continued eligibility of the Common Stock for listing on such
exchanges and quotation systems.
50. Corporate
Existence. So long as a Buyer beneficially owns any
Notes or Warrants, the Company shall maintain its corporate existence and shall
not sell all or substantially all of the Company’s assets, except in the event
of a merger or consolidation or sale of all or substantially all of the
Company’s assets, where the surviving or successor entity in such transaction
(i) assumes the Company’s obligations hereunder and under the agreements and
instruments entered into in connection herewith and (ii) is a publicly traded
corporation whose Common Stock is listed for trading on the OTCBB, Nasdaq,
Nasdaq SmallCap, NYSE or AMEX.
51. No
Integration. The Company shall not make any offers or
sales of any security (other than the Securities) under circumstances that
would
require registration of the Securities being offered or sold hereunder under
the
1933 Act or cause the offering of the Securities to be integrated with any
other
offering of securities by the Company for the purpose of any stockholder
approval provision applicable to the Company or its securities.
52. Breach
of
Covenants. If the
Company
breaches any of the covenants set forth in this Section 4, and in addition
to
any other remedies available to the Buyers pursuant to this Agreement, the
Company shall pay to the Buyers the Standard Liquidated Damages Amount, in
cash
or in shares of Common Stock at the option of the Company, until such breach
is
cured. If the Company elects to pay the Standard Liquidated Damages
Amount in shares, such shares shall be issued at the Conversion Price at the
time of payment.
53. TRANSFER
AGENT
INSTRUCTIONS. The Company shall issue irrevocable
instructions to its transfer agent to issue certificates, registered in the
name
of each Buyer or its nominee, for the Conversion Shares and Warrant Shares
in
such amounts as specified from time to time by each Buyer to the Company upon
conversion of the Notes or exercise of the Warrants in accordance with the
terms
thereof (the “Irrevocable
Transfer Agent Instructions”). Prior to registration of the
Conversion Shares and Warrant Shares under the 1933 Act or the date on which
the
Conversion Shares and Warrant Shares may be sold pursuant to Rule 144 without
any restriction as to the number of Securities as of a particular date that
can
then be immediately sold, all such certificates shall bear the restrictive
legend specified in Section 2(g) of this Agreement. The Company
warrants that no instruction other than the Irrevocable Transfer Agent
Instructions referred to in this Section 5, and stop transfer instructions
to
give effect to Section 2(f) hereof (in the case of the Conversion Shares and
Warrant Shares, prior to registration of the Conversion Shares and Warrant
Shares under the 1933 Act or the date on which the Conversion Shares and Warrant
Shares may be sold pursuant to Rule 144 without any restriction as to the number
of Securities as of a particular date that can then be immediately sold), will
be given by the Company to its transfer agent and that the Securities shall
otherwise be freely transferable on the books and records of the Company,
subject to and to the extent provided in this Agreement and the Registration
Rights Agreement. Nothing in this Section shall affect in any way
each Buyer’s obligations and agreement set forth in Section 2(g) hereof to
comply with all applicable prospectus delivery requirements, if any, upon
re-sale of the Securities. If a Buyer provides the Company with (i)
an opinion of counsel in form, substance and scope customary for opinions in
comparable transactions, to the effect that a public sale or transfer of such
Securities may be made without registration under the 1933 Act and such sale
or
transfer is effected or (ii) the Buyer provides reasonable assurances that
the
Securities can be sold pursuant to Rule 144, the Company shall permit the
transfer, and, in the case of the Conversion Shares and Warrant Shares, promptly
instruct its transfer agent to issue one or more certificates, free from
restrictive legend, in such name and in such denominations as specified by
such
Buyer. The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Buyers, by vitiating
the intent and purpose of the transactions contemplated
hereby. Accordingly, the Company acknowledges that the remedy at law
for a breach of its obligations under this Section 5 may be inadequate and
agrees, in the event of a breach or threatened breach by the Company of the
provisions of this Section, that the Buyers shall be entitled, in addition
to
all other available remedies, to an injunction restraining any breach and
requiring immediate transfer, without the necessity of showing economic loss
and
without any bond or other security being required.
Page
11
54. CONDITIONS
TO THE COMPANY’S
OBLIGATION TO SELL. The obligation of the Company
hereunder to issue and sell the Notes and Warrants to a Buyer at the Closing
is
subject to the satisfaction, at or before the Closing Date of each of the
following conditions thereto, provided that these conditions are for the
Company’s sole benefit and may be waived by the Company at any time in its sole
discretion:
55. The
applicable Buyer shall have executed this Agreement and the Registration Rights
Agreement, and delivered the same to the Company.
56. The
applicable Buyer shall have delivered the Purchase Price in accordance with
Section 1(b) above.
57. The
representations and warranties of the applicable Buyer shall be true and correct
in all material respects as of the date when made and as of the Closing Date
as
though made at that time (except for representations and warranties that speak
as of a specific date), and the applicable Buyer shall have performed, satisfied
and complied in all material respects with the covenants, agreements and
conditions required by this Agreement to be performed, satisfied or complied
with by the applicable Buyer at or prior to the Closing Date.
58. No
litigation, statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by or
in
any court or governmental authority of competent jurisdiction or any
self-regulatory organization having authority over the matters contemplated
hereby which prohibits the consummation of any of the transactions contemplated
by this Agreement.
59. CONDITIONS
TO EACH BUYER’S
OBLIGATION TO PURCHASE. The obligation of each Buyer
hereunder to purchase the Notes and Warrants at the Closing is subject to the
satisfaction, at or before the Closing Date of each of the following conditions,
provided that these conditions are for such Buyer’s sole benefit and may be
waived by such Buyer at any time in its sole discretion:
60. The
Company shall have executed this Agreement and the Registration Rights
Agreement, and delivered the same to the Buyer.
61. The
Company shall have delivered to such Buyer duly executed Notes (in such
denominations as the Buyer shall request) and Warrants in accordance with
Section 1(b) above.
62. The
Irrevocable Transfer Agent Instructions, in form and substance satisfactory
to a
majority-in-interest of the Buyers, shall have been delivered to and
acknowledged in writing by the Company’s Transfer Agent.
63. The
representations and warranties of the Company shall be true and correct in
all
material respects as of the date when made and as of the Closing Date as though
made at such time (except for representations and warranties that speak as
of a
specific date) and the Company shall have performed, satisfied and complied
in
all material respects with the covenants, agreements and conditions required
by
this Agreement to be performed, satisfied or complied with by the Company at
or
prior to the Closing Date. The Buyer shall have received a
certificate or certificates, executed by the chief executive officer of the
Company, dated as of the Closing Date, to the foregoing effect and as to such
other matters as may be reasonably requested by such Buyer including, but not
limited to certificates with respect to the Company’s Articles of Incorporation,
By-laws and Board of Directors’ resolutions relating to the transactions
contemplated hereby.
64. No
litigation, statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by or
in
any court or governmental authority of competent jurisdiction or any
self-regulatory organization having authority over the matters contemplated
hereby which prohibits the consummation of any of the transactions contemplated
by this Agreement.
65. No
event
shall have occurred which could reasonably be expected to have a Material
Adverse Effect on the Company.
Page
12
66. The
Buyer
shall have received an officer’s certificate described in Section 3(c) above,
dated as of the Closing Date.
67. GOVERNING
LAW;
MISCELLANEOUS.
68. Governing
Law. THIS AGREEMENT SHALL BE ENFORCED, GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD
TO THE PRINCIPLES OF CONFLICT OF LAWS. THE PARTIES HERETO HEREBY
SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE UNITED STATES FEDERAL COURTS LOCATED
IN NEW YORK, NEW YORK WITH RESPECT TO ANY DISPUTE ARISING UNDER THIS AGREEMENT,
THE AGREEMENTS ENTERED INTO IN CONNECTION HEREWITH OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY. BOTH PARTIES IRREVOCABLY WAIVE THE DEFENSE
OF AN
INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH SUIT OR
PROCEEDING. BOTH PARTIES FURTHER AGREE THAT SERVICE OF PROCESS UPON A
PARTY MAILED BY FIRST CLASS MAIL SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE
SERVICE OF PROCESS UPON THE PARTY IN ANY SUCH SUIT OR
PROCEEDING. NOTHING HEREIN SHALL AFFECT EITHER PARTY’S RIGHT TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW. BOTH PARTIES AGREE THAT
A FINAL NON-APPEALABLE JUDGMENT IN ANY SUCH SUIT OR PROCEEDING SHALL BE
CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON SUCH JUDGMENT
OR IN ANY OTHER LAWFUL MANNER. THE PARTY WHICH DOES NOT PREVAIL IN
ANY DISPUTE ARISING UNDER THIS AGREEMENT SHALL BE RESPONSIBLE FOR ALL FEES
AND
EXPENSES, INCLUDING ATTORNEYS’ FEES, INCURRED BY THE PREVAILING PARTY IN
CONNECTION WITH SUCH DISPUTE.
69. Counterparts;
Signatures by
Facsimile. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
shall constitute one and the same agreement and shall become effective when
counterparts have been signed by each party and delivered to the other
party. This Agreement, once executed by a party, may be delivered to
the other party hereto by facsimile transmission of a copy of this Agreement
bearing the signature of the party so delivering this Agreement.
70. Headings. The
headings of this Agreement are for convenience of reference only and shall
not
form part of, or affect the interpretation of, this Agreement.
71. Severability. In
the event that any provision of this Agreement is invalid or unenforceable
under
any applicable statute or rule of law, then such provision shall be deemed
inoperative to the extent that it may conflict therewith and shall be deemed
modified to conform with such statute or rule of law. Any provision
hereof which may prove invalid or unenforceable under any law shall not affect
the validity or enforceability of any other provision hereof.
72. Entire
Agreement;
Amendments. This Agreement and the instruments
referenced herein contain the entire understanding of the parties with respect
to the matters covered herein and therein and, except as specifically set forth
herein or therein, neither the Company nor the Buyer makes any representation,
warranty, covenant or undertaking with respect to such matters. No
provision of this Agreement may be waived or amended other than by an instrument
in writing signed by the party to be charged with enforcement.
Page
13
73. Notices. Any
notices required or permitted to be given under the terms of this Agreement
shall be sent by certified or registered mail (return receipt requested) or
delivered personally or by courier (including a recognized overnight delivery
service) or by facsimile and shall be effective five days after being placed
in
the mail, if mailed by regular United States mail, or upon receipt, if delivered
personally or by courier (including a recognized overnight delivery service)
or
by facsimile, in each case addressed to a party. The addresses for
such communications shall be:
If
to the
Company:
Midnight
Holdings Group, Inc.
00000
Xxxx Xxxx, Xxxxx 000
Xxxxxxx
Xxxxxxxx, XX 00000
Attention: Chief
Executive Officer
Telephone: 000-000-0000
Facsimile: 000-000-0000
With
a
copy to:
Xxxxxx
& Xxxxxx, LLP
000
Xxxxx
0 Xxxxx, Xxxxx 000
Xxxxxxxxx,
XX 00000
Attention: Xxxxx
X. Xxxxxx, Esq.
Telephone: 000-000-0000
Facsimile: 000-000-0000
If
to a
Buyer: To the address set forth immediately below such Buyer’s name
on the signature pages hereto.
With
copy
to:
Xxxxxxx
Xxxxx Xxxxxxx & Xxxxxxxxx, LLP
0000
Xxxxxx Xxxxxx
00xx
Xxxxx
Xxxxxxxxxxxx,
Xxxxxxxxxxxx 00000
Attention: Xxxxxx
X. Xxxxxxxx, Esq.
Telephone: 000-000-0000
Facsimile: 000-000-0000
Email: xxxxxxxx@xxxxxxxxxxxx.xxx
Each
party shall provide notice to the other party of any change in
address.
Page
14
74. Successors
and
Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and
assigns. Neither the Company nor any Buyer shall assign this
Agreement or any rights or obligations hereunder without the prior written
consent of the other. Notwithstanding the foregoing, subject to
Section 2(f), any Buyer may assign its rights hereunder to any person who
is an “Accredited Investor” that purchases Securities in a private transaction
from a Buyer or to any of its “affiliates,” as that term is defined under the
1934 Act, without the consent of the Company.
75. Third
Party
Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
76. Survival. The
representations and warranties of the Company and the agreements and covenants
set forth in Sections 3, 4, 5 and 8 shall survive the closing hereunder
notwithstanding any due diligence investigation conducted by or on behalf of
the
Buyers. The Company agrees to indemnify and hold harmless each of the
Buyers and all their officers, directors, employees and agents for loss or
damage arising as a result of or related to any breach or alleged breach by
the
Company of any of its representations, warranties and covenants set forth in
Sections 3 and 4 hereof or any of its covenants and obligations under this
Agreement or the Registration Rights Agreement, including advancement of
reasonable expenses as they are incurred.
77. Publicity. The
Company and each of the Buyers shall have the right to review a reasonable
period of time before issuance of any press releases, SEC, OTCBB or NASD
filings, or any other public statements with respect to the transactions
contemplated hereby; provided, however,
that the
Company shall be entitled, without the prior approval of each of the Buyers,
to
make any press release or SEC, OTCBB (or other applicable trading market) or
NASD filings with respect to such transactions as is required by applicable
law
and regulations (although each of the Buyers shall be consulted by the Company
in connection with any such press release prior to its release and shall be
provided with a copy thereof and be given an opportunity to comment
thereon).
78. Further
Assurances. Each party shall do and perform, or cause
to be done and performed, all such further acts and things, and shall execute
and deliver all such other agreements, certificates, instruments and documents,
as the other party may reasonably request in order to carry out the intent
and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
79. No
Strict
Construction. The language used in this Agreement will
be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any
party.
E. Remedies. The
Company acknowledges that a breach by it of its obligations hereunder will
cause
irreparable harm to the Buyers by vitiating the intent and purpose of the
transaction contemplated hereby. Accordingly, the Company
acknowledges that the remedy at law for a breach of its obligations under this
Agreement will be inadequate and agrees, in the event of a breach or threatened
breach by the Company of the provisions of this Agreement, that the Buyers
shall
be entitled, in addition to all other available remedies at law or in equity,
and in addition to the penalties assessable herein, to an injunction or
injunctions restraining, preventing or curing any breach of this Agreement
and
to enforce specifically the terms and provisions hereof, without the necessity
of showing economic loss and without any bond or other security being
required.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
Page
15
IN
WITNESS WHEREOF, the
undersigned Buyers and the Company have caused this Agreement to be duly
executed as of the date first above written.
MIDNIGHT
HOLDINGS GROUP,
INC.
/s/Xxxxxxxx
Xxxxx
Xxxxxxxx
Xxxxx
Chief
Executive Officer
AJW
PARTNERS, LLC
By: SMS
Group, LLC
/s/Xxxxx
X.
Xxxxxxxx
Xxxxx
X.
Xxxxxxxx
Manager
RESIDENCE: Delaware
ADDRESS: 0000
Xxxxxxxx Xxxxxxxxx
Xxxxx
000
Xxxxxx,
Xxx
Xxxx 00000
Facsimile: (000)
000-0000
Telephone: (000)
000-0000
AGGREGATE
SUBSCRIPTION AMOUNT:
Aggregate
Principal Amount of
Notes: $
Number
of
Warrants:
Aggregate
Remaining Purchase Price (after
accounting
for any principal of Bridge
Note): $
Page
16
AJW
OFFSHORE,
LTD.
By: First
Street Manager II, LLC
/s/Xxxxx
X.
Xxxxxxxx
Xxxxx
X.
Xxxxxxxx
Manager
RESIDENCE:
Cayman Islands
ADDRESS: AJW
Offshore, Ltd.
X.X.
Xxx
00000 XXX
Xxxxx
Xxxxxx, Xxxxxx Xxxxxx, B.W.I.
AGGREGATE
SUBSCRIPTION AMOUNT:
Aggregate
Principal Amount of
Notes: $
Number
of
Warrants:
Aggregate
Remaining Purchase Price (after
accounting
for any principal of Bridge
Note): $
Page
17
AJW
QUALIFIED PARTNERS,
LLC
By: AJW
Manager, LLC
/s/Xxxxx
X.
Xxxxxxxx
Xxxxx
X.
Xxxxxxxx
Manager
RESIDENCE: New
York
ADDRESS: 0000
Xxxxxxxx Xxxxxxxxx
Xxxxx
000
Xxxxxx,
Xxx
Xxxx 00000
Facsimile: (000)
000-0000
Telephone: (000)
000-0000
AGGREGATE
SUBSCRIPTION AMOUNT:
Aggregate
Principal Amount of
Notes: $
Number
of
Warrants:
Aggregate
Remaining Purchase Price (after
accounting
for any principal of Bridge
Note): $
Page
18
NEW
MILLENNIUM CAPITAL PARTNERS II,
LLC
By: First
Street Manager II, LLP
/s/Xxxxx
X.
Xxxxxxxx
Xxxxx
X.
Xxxxxxxx
Manager
RESIDENCE: New
York
ADDRESS: 0000
Xxxxxxxx Xxxxxxxxx
Xxxxx
000
Xxxxxx,
Xxx
Xxxx 00000
Facsimile: (000)
000-0000
Telephone: (000)
000-0000
AGGREGATE
SUBSCRIPTION AMOUNT:
Aggregate
Principal Amount of
Notes:
$
Number
of
Warrants:
Aggregate
Remaining Purchase Price (after
accounting
for any principal of Bridge
Note): $
Page
19
Exhibit
A
FORM
OF
NOTE
(See
Attached)
Page
20
Exhibit
B
FORM
OF
WARRANT
(See
Attached)
Page
21
Exhibit
C
FORM
OF REGISTRATION RIGHTS
AGREEMENT
(See
Attached)
Page
22
